Ray Cohen at MD&M 2026 Names the Three Ways Medtech VC Incentives Sabotage the Best Exits

June 23, 2026

Table of contents

Ray Cohen at MD&M 2026 Names the Three Ways Medtech VC Incentives Sabotage the Best Exits

Key Takeaways

Medtech VC incentive misalignment manifests in three structural ways: fragmented cap tables, pressure toward incremental innovation, and acquirer-rep portfolio dynamics post-exit
Ray Cohen at the MD&M 2026 keynote described how rounding up small dollars from non-professional investors creates cap tables that become operationally crippling
The "incremental versus moonshot" trap is reinforced by VC fundraising, FDA pathway selection, and CMS reimbursement structure simultaneously
Choosing a smaller acquirer where your technology sits at the centre of strategy produces better outcomes than selling into a strategic where it becomes a minor portfolio addition
The founder solves incentive misalignment by selecting boards that aren't "coin operated" and by structuring decisions that leave optionality for the next thing rather than maximising the current exit

The 2023 vintage of medtech exits looks like good news on the surface. $17B in combined acquisition value across half a dozen named companies. Founders getting paid. Boards declaring wins. Investors marking up returns.

But the founders inside those exits, the ones who built the companies through pre-clinical, clearance, and commercial scale, increasingly describe the experience as one of gradually losing optionality at every funding round and every strategic decision.

Decisions that looked rational individually compounded into a structure where the founder's ability to build the next thing got smaller with every round of capital.

At MD&M 2026, Ray Cohen and Tom West co-delivered a keynote that named these dynamics specifically. The keynote represented $6.1B of combined exit experience and was, in my read, the most honest public account of medtech VC incentive misalignment I've heard.

This post breaks down what they said, what the structural mechanisms are, and what founders should do about them before signing the next term sheet.

The Fragmented Cap Table Problem

The first piece of medtech VC incentive misalignment is one of the most structurally underweighted: the gradual compounding of small-dollar investors into a cap table that becomes operationally impossible to manage.

I covered the keynote on a recap episode about MD&M 2026's $6.1B advice from Ray Cohen and Tom West. Ray was direct about the cap table dynamic:

"You're rounding up all this small dollars and next thing you know, you got a cap table which is filled with dozens of names or hundreds of names. It's a nightmare as a CEO of a company trying to service those individuals. These are not professional investors. They got a lot of questions about everything."

So the misalignment compounds over time. The founder takes the small angel checks early because the company needs the capital and the lead investor hasn't materialised yet.

Each individual check makes sense. The cumulative effect is a cap table where the CEO is spending meaningful time servicing 50+ small-dollar holders who have varying levels of medtech sophistication.

The operating cost shows up downstream. When a strategic acquirer runs diligence on the cap table, fragmented ownership creates execution friction. Some holders need to be cashed out. Some need to be approached individually for consent.

Some block transactions through inattention rather than active opposition. The acquirer often discounts the deal value to cover the friction risk, which means the founder pays the misalignment cost twice: once in time servicing the cap table during operations, once in deal value at exit.

The Incremental-vs-Moonshot Trap

The second piece of medtech VC incentive misalignment shapes what the company builds. The VC capital structure incentivises incremental improvements that fit existing reimbursement and regulatory pathways, even when the medtech category needs moonshot innovation.

I interviewed George Murgatroyd, GM and VP at Medtronic Surgical Robotics, on an episode about digital surgery and how AI is transforming the operating room. George named the dynamic from inside a strategic acquirer's perspective:

"The incremental improvements still work in like within the cost of what somebody's expecting for certain innovation and then we're able to like sort of raise money, people are able to raise money for that, get acquired, etc. versus like, you know, a big moonshot innovation that's."

So the incentive structure rewards founders who pitch incremental over founders who pitch moonshot. The incremental story has a known regulatory pathway, a known reimbursement path, and a known acquirer profile. The moonshot story has none of those, which makes it harder to fund.

I covered the same trap from the founder's side when I interviewed Fazila Seker, CEO of Insightec, on an episode about MRI-native robotic platforms for prostate cancer. Fazila explained the temptation directly:

"There's this temptation and it's hard I can't fault founders for doing this which is like you know to go down an incremental pathway or 510k and stuff, but I think the other side of it is that like to the FDA and to CMS and everything, it's like, 'Oh, no. It's a it's just an incremental thing.'."

So the founder choosing the incremental pathway gets two things at once: easier capital, and easier regulatory and reimbursement positioning. Both look like wins in the short term.

The trade is the moonshot upside, which the company has now signalled to FDA, CMS, and the capital markets that it isn't pursuing.

The Acquirer-Rep Portfolio Dynamic Post-Exit

The third piece of medtech VC incentive misalignment shows up after the exit closes. The acquirer's rep force has its own incentives, and those incentives often work against the acquired technology's success.

On an episode about 7 lessons from $17B in medtech exits that every founder must know, I covered the acquirer-rep dynamic:

"If the choir's reps aren't incentivized to prioritize your product, if it's minor portfolio addition rather than strategic opportunity, the adoption is going to stall. A smaller acquire where your technology sits at the center of the strategy will drive better outcomes for patients."

So the calculus on which acquirer to sell into has a second variable. The deeper question is whether the acquired technology will get rep attention post-close. A large strategic acquirer with 500 reps and 30 product lines will pay top dollar.

But the rep force will spend time on the highest-commission products in the bag, and the acquired technology may sit at position 28 of 30 in the rep's priority order.

A smaller acquirer where the acquired technology sits at the centre of the strategy will pay less in headline terms.

But the rep force focus on the technology produces meaningfully better commercial outcomes, which usually matters more to founders who care about patient access than to founders optimising purely for the exit cheque.

Why Vision-Oriented Boards Beat Coin-Operated Boards

The same exits lessons episode named the founder-level solution to medtech VC incentive misalignment: board selection.

"You have to have a board that's got the vision and they're not just coin operated. If you're a founder, you don't want to leave money on the table, but you want to leave opportunity for the next thing because all of you when you have your exits, Ray Cohen, he had his first."

So the structural fix is to build a board that thinks in terms of multi-decade vision rather than next-quarter share price.

Coin-operated boards push toward the maximum immediate exit value, which often closes off the optionality the founder needs to build the next thing. Vision-oriented boards push toward decisions that leave the founder with relationships, reputation, and category positioning that compound across multiple companies.

This isn't a soft principle. It's a hard selection criterion on every term sheet. The board partners the founder accepts shape every major decision over the next five to ten years.

Founders who select for the highest-valuation lead investor without screening for board behaviour end up with structurally misaligned boards that produce the predictable outcomes.

What Founders Should Do Before the Next Round

The right response to medtech VC incentive misalignment is not to refuse VC capital. The right response is to make the structural moves that prevent the misalignment from compounding.

First, consolidate the cap table before the company gets large enough for it to become an exit issue. Buy back small-dollar holders during early Series B with budget allocated specifically for cap-table cleanup. The capital cost is small relative to the deal-friction cost at exit.

Second, decide before each fundraise whether the company is pitching the incremental or the moonshot story. The two stories require different investors, different boards, and different regulatory strategies. Mixing them produces a company that doesn't fit either profile and underperforms both.

Third, when acquirer conversations start, run the rep-portfolio analysis on every potential acquirer. The right metric isn't top-line valuation. It's expected rep attention as a function of technology centrality in the acquirer's portfolio. Smaller acquirers with strategic centrality often produce better all-in outcomes than larger acquirers paying higher headline numbers.

Fourth, build the board with vision-screening from the first institutional round. The board partners selected at Series A shape every decision through to exit. Founders who optimise for valuation alone at Series A pay for the board mistake for the next eight years.

For more on the broader pattern across the largest medtech exits, see the medtech exit playbook. And for the operator framing of how Ray Cohen built the $3.7B Axonics exit on these principles, see how Ray Cohen engineered 20 consecutive winning quarters.

What This Means for Medtech Founders

In my experience working with medtech founders, the VC incentive misalignment conversation tends to surface only after the second or third round, when the founder feels the structural constraints closing in. By that point, the cap table is fragmented, the board composition is locked, and the strategic narrative is committed.

So the better practice is to surface the conversation pre-Series A, with the founder, the lead investor, and a small advisory board that knows the medtech VC landscape.

The four moves above (cap table discipline, story selection, acquirer screening, vision-aligned board) are all easier to execute pre-Series A than post-Series C. Founders who do the work upfront avoid the misalignment compounding into the structural traps Ray and Tom named at MD&M 2026.

Frequently Asked Questions

What is medtech VC incentive misalignment?

Medtech VC incentive misalignment refers to the structural mismatch between what venture capital fund economics reward and what produces the best long-term outcomes for medtech founders, patients, and the acquirers buying these companies.

The misalignment shows up in fragmented cap tables, pressure toward incremental innovation over moonshot innovation, acquirer-rep portfolio dynamics that under-prioritise acquired technologies, and board composition that optimises for next-quarter share price over multi-decade vision.

How does VC fundraising fragment medtech cap tables?

The fragmentation happens gradually. Early-stage medtech founders take small-dollar checks from angels and seed funds because lead investors haven't materialised and the company needs capital. Each individual check makes sense.

The cumulative effect across multiple early rounds produces cap tables with 50 to 200+ named holders, many of whom aren't professional medtech investors. The CEO ends up spending operational time servicing these holders, and at exit, the fragmented ownership creates deal-friction risk that strategic acquirers price into reduced offers.

Why does VC capital push medtech toward incremental rather than moonshot innovation?

The VC capital structure rewards companies with known regulatory pathways (510(k)), known reimbursement pathways (existing CPT codes), and known acquirer profiles (large strategic medtechs).

Incremental medtech innovation fits all three. Moonshot medtech innovation requires novel regulatory pathways, new reimbursement coding, and category creation, all of which are riskier from a fund-return perspective.

Founders pitching moonshot stories often pivot to incremental positioning to fit the capital available, which locks the company into the incremental trajectory even when the underlying technology could have supported a moonshot outcome.

How should medtech founders evaluate acquirer fit beyond headline valuation?

The most important non-valuation criterion is rep-force attention as a function of technology centrality in the acquirer's portfolio. A large strategic acquirer with 500 reps and 30 product lines will pay top dollar but the acquired technology may sit at position 28 of 30 in rep priority.

A smaller acquirer where the acquired technology sits at the centre of strategy will pay less but produce meaningfully better commercial outcomes. Founders who care about patient access and long-term category positioning often prefer the smaller-acquirer outcome despite the lower headline price.

Listen to the Full Conversations

The episodes referenced in this post are available on The State of MedTech. Subscribe wherever you listen to podcasts.

About the Author

Omar Khateeb is the founder of MarketCraft and host of The State of MedTech, the number one podcast in the medtech industry.

He works with medtech founders and commercial leaders on market engineering, commercialisation strategy, and revenue growth. Visit marketcraft.ai or subscribe to The State of MedTech for weekly conversations with the people building the future of medical devices.